U.S. Major Averages Rebound and Shake Off Rate Path Worries

Barry Adams
11 Apr, 2024
New York City

Market indexes on Wall Street lacked direction in volatile trading, and investors reviewed the wholesale price inflation report. 

The S&P 500 index and the Nasdaq Composite traded sideways in quiet trading as investors reviewed two inflation reports over two days. 

The producer price index rose 2.1% from a year ago. In March, it inched higher by 0.2% on the month, the U.S. Bureau of Labor Statistics reported Thursday. 

Monthly producer prices rose at the slowest pace in three months, following a 0.6% rise in February and a 0.4% increase in January. 

Producer prices increased in March, driven by a 0.3% rise in services, and goods price inflation decreased by 0.1% after rising 1.2% in the previous month. 

The core producer price index, which excludes food and energy prices, rose 0.1% on the month and increased 2.4% from a year ago. 

On Wednesday, consumer price inflation accelerated to a three-month high. 

Consumer price inflation in March accelerated to an annual pace of 3.5% and advanced 0.4% for the month, the U.S. Bureau of Labor Statistics reported Wednesday. 

Annual inflation accelerated for the second month in a row to 3.5% in March, up from 3.2% in February and 3.1% in January. 

Core inflation, which excludes food and energy prices, held steady at 0.4% from the previous month and rose 3.8% from a year ago in March. 

 

U.S. Indexes and Yields

The S&P 500 index increased 0.5% to 5,184.08, and the Nasdaq Composite rose 0.8% to 16,292.93. 

The yield on 2-year Treasury notes edged higher to 4.94%, 10-year Treasury notes inched up to 4.53%, and 30-year Treasury bonds edged up to 4.63%.

WTI crude oil increased $1.23 to $84.98 a barrel, and natural gas prices decreased 8 cents to $1.80 a thermal unit.

Gold increased by $13.22 to $2,349.28 an ounce, and silver rose 10 cents to $28.04. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 105.11.

 

U.S. Stock Movers

Vertex Pharmaceuticals edged up 0.6% to $400.0 after the company agreed to acquire Alpine Immune Sciences for $4.9 billion in cash, or about $65 per share. 

Alpine Immune soared 36% to $64.21.

CarMax declined 11.7% to $70.05 after the used car retailer reported weaker-than-expected quarterly results. 

Regional banks were in focus after Treasury yields advanced following two inflation reports over the last two days. 

New York Community Bancorp traded near its low for the year at $2.96, Western Alliance declined 0.1% to $57.32, and MVB Financial dropped 0.3% to $19.78. 

 

ECB Holds Rates Steady for the Fifth Time, Signals Possible Cuts in Future 

European market indexes struggled to advance after the European Central Bank held its interest rate steady and signaled possible rate cuts in the future. 

Benchmark indexes in Frankfurt, Paris, and London decreased after comments from European Central Bank president Christine Lagarde. 

“If the Governing Council’s updated assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission were to further increase its confidence that inflation is converging to the target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction,” noted the statement released by the Governing Council. 

President Lagarde reinforced the view expressed in the statement and stressed that the committee is ready to lower rates if conditions warrant it in the near future. 

As widely expected, the ECB held steady for the fifth time in a row, with its main refinancing operation rate at a 22-year high of 4.50% and deposit facility rate at 4.0%. 

Inflation has steadily declined to 2.4% in March after peaking at 10.6% in October 2022, largely because of the fall in imported energy prices. 

However, service inflation continues to stay elevated at 4%, making it harder for policymakers to bring down inflation below 2%. 

Service sector inflation is closely watched by policymakers because about 70% of the labor force is employed in the sector.

 

Europe Indexes and Yields

The DAX index decreased by 0.8% to 17,954.48, the CAC-40 index fell by 0.3% to 8,023.74, and the FTSE 100 index inched lowerer by 0.5% to 7,923.80.

The yield on 10-year German bonds edged up to 2.45%; French bonds inched higher to 2.93%; the UK gilts edged higher to 4.23%; and Italian bonds inched lower to 3.81%.

The euro edged higher to $1.073; the British pound inched higher to $1.253; and the U.S. dollar edged lower to 91.22 Swiss cents.

Brent crude decreased $0.63 to $89.85. a barrel, and the Dutch TTF natural gas rose by €2.04 to €29.53 per MWh.

 

Europe Stock Movers

Givaudan SA declined 1.3% to CHF 3,980.0, despite the Swiss fragrance and flavor maker reporting higher first-quarter sales. 

Societe Generale increased 0.9% to €25.36 after the French lender agreed to sell its equipment leasing and financing business to BPCE for €1.1 billion. 

AstraZeneca PLC rose 1.9% to 10,942.0 pence after the biopharmaceutical company announced its plan to increase its dividend by 7% in 2024. 

Publicis Groupe SA added 1.5% to €102.10 after the French advertising company reported organic sales in the first quarter increased by 4.9%, driven by strong performance in all regions. 

 

Yen Weakness and U.S. Rate Path Uncertainty Overshadow Tokyo Trading

Stocks in Tokyo declined following the weakness in New York after the latest inflation report dashed all hopes of an imminent interest rate cut. 

Asian markets were on the defensive after the hotter-than-expected U.S. inflation in March dampened the hopes of a rate cut in June. 

Investors pared back rate-cut expectations after U.S. inflation accelerated for the third month in a row in March to 3.5%. 

Market participants are worried that persistent inflation above the Fed's target rate of 2% may force the Federal Reserve to push rate cuts all the way into 2025, contrary to the Fed's projection of as many as three rate cuts this year. 

Japan Stock Movers 

The Nikkei 225 Stock Average decreased 0.4% to 39,429.36, and the Topix index increased 0.2% to 2,748.17. 

Tech stocks were among the leading decliners, and financial stocks were among the leading gainers in Thursday's trading. 

SoftBank, Advantest, Tokyo Electron, Screen Holdings, Disco Corp., and Sakura Internet declined between 1.5% and 4%. 

Banks advanced after the yield on 10-year Japanese government bonds rose to 0.85% after investors dialed down U.S. interest rate expectations. 

Mitsubishi UFJ, Sumitomo Mitsubishi, and Mizuho Financial rose between 0.3% and 0.5%. 

 

China Indexes Fall On Growing Deflation Worries 

Stocks in Shanghai and Hong Kong struggled after the latest inflation data stoked fears of protracted consumer demand weakness. 

Investor sentiment was weak on the worry that policymakers may not provide strong enough stimulus to revive aggregate demand, dampening corporate earnings growth. 

Property stocks in Hong Kong dropped sharply on the worry that interest rates would remain elevated following the release of U.S. inflation data. 

The U.S. consumer price index in March accelerated to 3.5% from a year ago, and core inflation increased to 3.8%. 

The overall consumer price index advanced for the third month in a row after dropping to 3.1% in January, denting all hopes of a rate cut in June. 

The Hong Kong Monetary Authority follows the interest rate cycle set by the U.S. because the Hong Kong dollar has been pegged to the U.S. dollar since October 17, 1983, with a fixed exchange rate of HK$7.80 per U.S. dollar. 

The CSI 300 index increased 0.1% to 3,507.51, and the Hang Seng index decreased 1% to 16,970.12. 

China Vanke, Henderson Land Development, New World Development, and Sun Hung Kai declined between 1% and 4%. 

China Life, AIA Group, and Prudential PLC fell between 2% and 4%.